CHAPTER 101. COOPERATIVE DEVELOPMENT

NATURAL RESOURCES CODE

TITLE 3. OIL AND GAS

SUBTITLE C. POOLING AND COOPERATIVE AGREEMENTS

CHAPTER 101. COOPERATIVE DEVELOPMENT

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 101.001. DEFINITION. In this chapter, "commission" means

the Railroad Commission of Texas.

Acts 1977, 65th Leg., p. 2566, ch. 871, art. I, Sec. 1, eff.

Sept. 1, 1977.

Sec. 101.002. EXISTING AGREEMENT RIGHTS. None of the provisions

in this chapter restrict any of the rights that a person now may

have to make and enter into unitization and pooling agreements.

Acts 1977, 65th Leg., p. 2566, ch. 871, art. I, Sec. 1, eff.

Sept. 1, 1977.

Sec. 101.003. APPLICABILITY. None of the provisions in this

chapter impair the power of the commission to prevent waste under

the oil and gas conservation laws of the state except as provided

in Section 101.004 or repeal, modify, or impair any of the

provisions of Sections 85.002 through 85.003, 85.041 through

85.055, 85.056 through 85.064, 85.125, 85.201 through 85.207,

85.241 through 85.243, 85.249 through 85.252, or 85.381 through

85.385, Subchapter J of Chapter 85, or Subchapter P of Chapter

91, relating to oil and gas conservation.

Acts 1977, 65th Leg., p. 2566, ch. 871, art. I, Sec. 1, eff.

Sept. 1, 1977.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

816, Sec. 7, eff. September 1, 2007.

Sec. 101.004. CONFLICT WITH ANTITRUST ACTS. (a) Agreements and

operations under agreements which are in accordance with the

provisions in this chapter, being necessary to prevent waste and

conserve the natural resources of this state, shall not be

construed to be in violation of the provisions of Chapter 15,

Business & Commerce Code, as amended.

(b) If a court finds a conflict between the provisions in this

chapter and Chapter 15, Business & Commerce Code, as amended,

the provisions in this chapter are intended as a reasonable

exception to that law, necessary for the public interests stated

in Subsection (a) of this section.

(c) If a court finds that a conflict exists between the

provisions in this chapter and Chapter 15, Business &

Commerce Code, as amended, and finds that the provisions in this

chapter are not a reasonable exception to said Chapter 15, it is

the intent of the legislature that the provisions in this

chapter, or any conflicting portion of them, shall be declared

invalid rather than declaring Chapter 15, Business & Commerce

Code, as amended, or any portion of it, invalid.

Acts 1977, 65th Leg., p. 2567, ch. 871, art. I, Sec. 1, eff.

Sept. 1, 1977.

SUBCHAPTER B. COOPERATIVE AGREEMENTS IN SECONDARY RECOVERY

OPERATIONS

Sec. 101.011. AUTHORIZED AGREEMENTS FOR SEPARATELY OWNED

PROPERTIES. Subject to the approval of the commission, as

provided in this chapter, persons owning or controlling

production, leases, royalties, or other interests in separate

property in the same oil field, gas field, or oil and gas field

may voluntarily enter into and perform agreements for either or

both of the following purposes:

(1) to establish pooled units, necessary to effect secondary

recovery operations for oil or gas, including those known as

cycling, recycling, repressuring, water flooding, and pressure

maintenance and to establish and operate cooperative facilities

necessary for the secondary recovery operations;

(2) to establish pooled units and cooperative facilities

necessary for the conservation and use of gas, including those

for extracting and separating the hydrocarbons from the natural

gas or casinghead gas and returning the dry gas to a formation

underlying any land or leases committed to the agreement.

Acts 1977, 65th Leg., p. 2567, ch. 871, art. I, Sec. 1, eff.

Sept. 1, 1977.

Sec. 101.012. PERSONS BOUND BY AGREEMENTS. Agreements for

pooled units and cooperative facilities do not bind a landowner,

royalty owner, lessor, lessee, overriding royalty owner, or any

other person who does not execute them. The agreements bind only

the persons who execute them, their heirs, successors, assigns,

and legal representatives. No person shall be compelled or

required to enter into such an agreement.

Acts 1977, 65th Leg., p. 2567, ch. 871, art. I, Sec. 1, eff.

Sept. 1, 1977.

Sec. 101.013. COMMISSION APPROVAL. (a) Agreements for pooled

units and cooperative facilities are not legal or effective until

the commission finds, after application, notice, and hearing:

(1) that the agreement is necessary to accomplish the purposes

specified in Section 101.011 of this code;

(2) that it is in the interest of the public welfare as being

reasonably necessary to prevent waste and to promote the

conservation of oil or gas or both;

(3) that the rights of the owners of all the interests in the

field, whether signers of the unit agreement or not, would be

protected under its operation;

(4) that the estimated additional cost, if any, of conducting

the operation will not exceed the value of additional oil and gas

so recovered, by or on behalf of the several persons affected,

including royalty owners, owners of overriding royalties, oil and

gas payments, carried interests, lien claimants, and others as

well as the lessees;

(5) that other available or existing methods or facilities for

secondary recovery operations or for the conservation and

utilization of gas in the particular area or field concerned or

for both are inadequate for the purposes; and

(6) that the area covered by the unit agreement contains only

that part of the field that has reasonably been defined by

development, and that the owners of interests in the oil and gas

under each tract of land in the area reasonably defined by

development are given an opportunity to enter into the unit on

the same yardstick basis as the owners of interests in the oil

and gas under the other tracts in the unit.

(b) A finding by the commission that the area described in the

unit agreement is insufficient or covers more acreage than is

necessary to accomplish the purposes of this chapter is grounds

for the disapproval of the agreement.

Acts 1977, 65th Leg., p. 2568, ch. 871, art. I, Sec. 1, eff.

Sept. 1, 1977.

Sec. 101.014. JOINTLY OWNED PROPERTIES. None of the provisions

in this chapter shall be construed to require the approval of the

commission of voluntary agreements for the joint development and

operation of jointly owned property.

Acts 1977, 65th Leg., p. 2568, ch. 871, art. I, Sec. 1, eff.

Sept. 1, 1977.

Sec. 101.015. COMMISSION REGULATION. An agreement executed

under the provisions of this chapter is subject to any valid

order or rule of the commission relating to location, spacing,

proration, conservation, or other matters within the authority of

the commission, whether adopted prior to or subsequent to the

execution of the agreement.

Acts 1977, 65th Leg., p. 2568, ch. 871, art. I, Sec. 1, eff.

Sept. 1, 1977.

Sec. 101.016. PERMISSIBLE PROVISIONS. (a) An agreement

authorized by this chapter may provide for the location and

spacing of input wells and for the extension of leases covering

any part of land committed to the unit as long as operations for

drilling or reworking are conducted on the unit or as long as

production of oil or gas in paying quantities is had from any

part of the land or leases committed to the unit. However, no

agreement may relieve an operator from the obligation to develop

reasonably the land and leases as a whole committed to the unit.

(b) An agreement authorized by this chapter may provide that the

dry gas after extraction of hydrocarbons may be returned to a

formation underlying any land or leases committed to the

agreement and may provide that no royalties are required to be

paid on the gas so returned.

Acts 1977, 65th Leg., p. 2568, ch. 871, art. I, Sec. 1, eff.

Sept. 1, 1977.

Sec. 101.017. PROHIBITED PROVISIONS. (a) No agreement

authorized by this chapter may attempt to contain the field rules

for the area or field, or provide for or limit the amount of

production of oil or gas from the unit properties, those

provisions being solely the province of the commission.

(b) No agreement authorized by this chapter may provide directly

or indirectly for the cooperative refining of crude petroleum,

distillate, condensate, or gas, or any by-product of crude

petroleum, distillate, condensate, or gas. The extraction of

liquid hydrocarbons from gas, and the separation of the liquid

hydrocarbons into propanes, butanes, ethanes, distillate,

condensate, and natural gasoline, without any additional

processing of any of them, is not considered to be refining.

(c) No agreement authorized by this chapter may provide for the

cooperative marketing of crude petroleum, condensate, distillate,

or gas, or any by-products of them.

Acts 1977, 65th Leg., p. 2569, ch. 871, art. I, Sec. 1, eff.

Sept. 1, 1977.

Sec. 101.018. EFFECT OF APPROVAL OUTSIDE OF UNIT. The approval

of an agreement authorized by this chapter shall not of itself be

construed as a finding that operations of a different kind or

character in the portion of the field outside of the unit are

wasteful or not in the interest of conservation.

Acts 1977, 65th Leg., p. 2569, ch. 871, art. I, Sec. 1, eff.

Sept. 1, 1977.

SUBCHAPTER C. PUBLIC LAND

Sec. 101.051. AUTHORITY OF COMMISSIONER OF GENERAL LAND OFFICE.

Subject to the approval specified in Section 101.052 of this

code, the Commissioner of the General Land Office, on behalf of

the State of Texas or of any fund belonging to the state, may

execute contracts committing to the agreements declared lawful by

the provisions of this chapter (1) the royalty interests in oil

or gas or both reserved to the state, or any fund of the state,

by law, in any patent, in any contract of sale, or under the

terms of any oil and gas lease lawfully issued by an official,

board, agent, agency, or authority of the state or (2) the free

royalty interests, whether leased or unleased, reserved to the

state pursuant to Section 51.201 or 51.054 of this code.

Acts 1977, 65th Leg., p. 2569, ch. 871, art. I, Sec. 1, eff.

Sept. 1, 1977. Amended by Acts 1987, 70th Leg., ch. 948, Sec. 33,

eff. Sept. 1, 1987.

Sec. 101.052. NECESSARY APPROVAL BY OTHER PERSONS AND STATE

AGENCIES. (a) An agreement that commits (1) the royalty

interests in land set apart by the constitution and laws of this

state for the permanent free school fund and the several asylum

funds, in river beds, inland lakes, and channels, and the area

within tidewater limits, including islands, lakes, bays, inlets,

marshes, reefs, and the bed of the sea, or (2) the free royalty

interests, whether leased or unleased, reserved to the state

pursuant to Section 51.201 or 51.054 of this code, must be

approved by the School Land Board.

(b) An agreement that covers land leased for oil and gas under

the Relinquishment Act, codified as Subchapter F in Chapter 52 of

this code, must be executed by the owners of the soil.

(c) An agreement that commits the royalty interests in land or

areas other than those covered by Subsections (a) and (b) of this

section must be approved by the board, official, agent, agency,

or authority of the state vested with authority to lease or to

approve the leasing of the land or areas for oil and gas.

Acts 1977, 65th Leg., p. 2569, ch. 871, art. I, Sec. 1, eff.

Sept. 1, 1977. Amended by Acts 1987, 70th Leg., ch. 948, Sec. 34,

eff. Sept. 1, 1987.